The success so far
The first full-fledged Islamic Bank was the established in Dubai in March 1975. This was rapidly followed by others. By the end of 1997, more than 176 banks and financial institutions, having total assets of $147.7 billion, had become established around the world. This does not include the profit and loss sharing counters that conventional banks have opened in Muslim as well as non-Muslim countries for their customers who wish to avoid interest. The rapid progress shows that Islamic Banking is not only conceivable but also feasible and viable. A report prepared by Dr. Traute Wohlers-Scharf for the Development Centre of the OECD confirms that Islamic banks “have attracted hitherto untouched segments of the Muslim population which, for religious reasons, had stayed outside financial circuits”. They “have also generated sizable profits for their shareholders and investment depositors. This indicates that the concept of interest-free finance can work in a modern context.”58
What is equally admirable is the rapid expansion in the volume of theoretical as well as empirical literature available on the subject. The various concepts related to Islamic modes of financing have consequently become more clarified than they were at the start of the Islamic financial movement. The desire to tackle a number of issues faced by Islamic banks has also led to the writing of a number of juristic papers and monographs of excellent quality and to the formulation of juristic decisions involving ijtihad. It is not just Muslims but also non-Muslims, and not only Muslim institutions like the Islamic Development Bank, the International Association of Islamic Banks and the fiqh boards of various Islamic banks, but also international organizations like the IMF and the BIS that are taking a keen interest in the subject. A number of Western Universities, including the Harvard Law School and Rice University in the U.S. and the Durham and Loughborough Universities in the U.K. have organized lectures and seminars on the subject and initiated teaching programmes leading to the Master’s and Ph.D. degrees in Islamic economics and finance. Something that may perhaps have been indirectly responsible for this increasing popularity of Islamic finance is the research for a ‘new architect’ for international finance even in the Western world as a result of recurring crises in the international financial system over the last three decades. There seems to be a realization that a system relying more on equity and less on debt may be able top help reduce the intensity and frequency of these crises. Thus one can safely state that on the whole there has been great progress in every direction.